Tuesday, 22 December 2015

Reader's Letter Of The Day

Sent in by Carol Wilcox to the FT:


I have just learned from a session of the House of Lords enquiry into the housing market that since 1951 the population of London has increased by 5 per cent. I don’t know whether its housing stock has kept pace*, but the real price of London houses has increased sixfold.

This does not seem to support Professor Muellbauer's assertion, in his letter of 21 December, that the main cause of exorbitant house price inflation is supply not keeping up with income and population growth.

I would say that it has more to do with the fact that the owners of £multi million homes in Westminster pay just £1,345.48 Council Tax, less than that paid by tenants of a £599 per month flat in Weymouth.**

* It has far more than kept pace, of course.

** While relevant to the regressive nature of Council Tax, that is not the relevant comparison here, the point is that current Council Tax in London is very low compared to what Domestic Rates would be if they had been indexed up in line with rental values since 1951. And the abandonment of rent controls and mortgage-to-income caps in the 1980s had a much bigger influence.


Random said...

Um, how to respond to this...


"Housing is a bitch.

A case can be made that divisive hot-button issues like inequality and immigration ultimately derive from housing dysfunction. Kevin Erdmann eloquently tells the tale. Matt Rognlie has famously argued that the increase in capital’s share of income, often blamed for inequality, is due largely to housing, once depreciation is taken into account. All of this reinforces the thesis of people like Ryan Avent, Edward Glaeser, and Matt Yglesias who have argued for years that housing supply constraints are to blame for high rents in powerhouse cities, and may constitute an important drag on productivity growth and a cause of macroeconomic stagnation. (See also Paul Krugman, quite recently.) Several of these writers argue that cities should eliminate restrictive zoning and other regulatory barriers to development, then let the free-market create housing supply. In a competitive marketplace, high prices are supposed to be their own cure. Zoning restrictions, urban permitting, and the de facto capacity of existing residents to veto new development are barriers to entry that prevent the magic of competition from taking hold and solving the problem."

Random said...

Also P. Krugman is talking BS "gentrification"